3 Ideas for Investing in a Down Market (Part 2)

In the last post, we looked at the importance of choosing companies that
have strong fundamentals — companies that are likely to make solid
recoveries. Today’s subject will be index
funds.

This brand of mutual fund is often considered vital to an investment
portfolio in times of economic slowdown and down market.

Index funds

Index funds are collections of all the stocks on a certain index. For
example, it is possible to invest in an S&P 500 index fund, in which case you would basically own shares in all the companies listed on that index.

There are stock indexes for small companies (Russell 2000), as well as
foreign index funds (MSCI EAFE). There are also index funds for energy, real estate and other sectors.

In general, index funds are generally in line with — or beat — the
performances of managed mutual funds. But without the extra fees that come with a managed fund. Index funds don’t often bring really, really amazing returns, but you can usually get somewhere between 8% and 11%, depending on the year. And index funds often combine the advantage of diversity with fees that are lower than those of actively managed mutual funds.

** Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment carries the risk of loss.

This is the second in a three-part series for Talk Stock Trading by guest Miranda Marquit. Miranda writes for Yielding Wealth and for the Banks.com Money & Investing blog. You can read Part 1 of the series here.